Beijing games in the gas market

By D. Rozanov

China, does not intend to limit itself to deliveries only from Russia. In China, the first batch of Canadian liquefied natural gas (LNG) was delivered in container tanks. Suppliers and buyers consider this export model to be very promising. Over the next two years, Gazprom will create its own gas liquefaction technology, the head of the Russian Ministry of Energy announced after the meeting of the interdepartmental working group on import substitution in the fuel and energy sector.

The import substitution of technologies and equipment should be accompanied by an increase in production, as well as the expansion of the geography of its own LNG supplies. This, it seems, is an ideal that has been outlined in the government and industry.

In particular, judging by the minister's explanations, Gazprom will use the domestic gas liquefaction system at the Baltic LNG plant.

The concern previously reported that the plant is scheduled to be commissioned in 2022-2023, it will focus primarily on the markets of the Middle East, South Asia, Latin America. If we talk in general about the directions of deliveries of Russian LNG, then, as explained in Gazprom, for three quarters of this year, to the world markets, 2.2 million tonnes of LNG were supplied. " And 80% of deliveries were in the Asia-Pacific region.

Earlier, the head of Gazprom, Alexei Miller, bluntly stated that it was Russia that could meet the gas needs of China. In January-September of this year, gas consumption in China increased by 18% - to 168 billion cubic meters. m. Even more rapidly, China is increasing gas imports: for the nine months plus 22% - up to 67 billion cubic meters. m. And 53% of imports are LNG. The reason is clear - own extraction is growing more slowly, and pipeline supplies from Central Asia do not correspond to current demand.

China again may face a shortage of natural gas and supplies from the Russian Federation will be able to remove the acute issue of ensuring peak winter demand. This refers primarily to the "Power of Siberia" being built, but not only. Also, judging by everything, options are considered to increase Russian exports of LNG. But the PRC does not intend to pin all its hopes exclusively on Russia, and this applies to both pipeline gas and liquefied gas. The media reported that the first party of Canadian LNG was successfully sent to China. "The gas was sent by sea and land to China in container tanks, such an export model will operate in the long term," notes the publication of People's Daily.

Representatives of the Chinese side said that the use of tank containers allows importing LNG without expensive regasification plants and without billions of investments in infrastructure. Upon arrival in China, containers can be delivered to the customer by land transport.

While 17 tons of LNG were sent to tank containers. But Canadian suppliers are counting on China's growing demand for gas. In particular, FortisBC, which sent LNG to China, predicts that in 2018 China may become the world's second largest liquefied gas buyer - especially given that Chinese LNG imports have more than tripled in the past six years.

Tank containers are special tanks intended for liquid cargo in intermodal transport. These tanks can easily be loaded onto road, rail or sea transport and transported to the end user. Naturally, experts say, such universal modules are gaining increasing popularity in logistics schemes, and in this sense they have a great future.

The use of tank containers should give impetus to the global LNG market, since it can replace the need to build large regasification complexes on the coast or, at least, to compete with them.

But, according to some experts, such an export model will not completely replace the pipelines, because if they are already built, then deliveries on them are cheaper.

At present, the demand for gas in the heating season has increased sharply in the PRC, which is connected with a large-scale program of transferring heating from coal to gas. At the same time, the gas pipeline infrastructure can not cope, and regasification terminals work with a load above the design one. In these conditions, all additional sources of LNG are in demand, including those in the low tonnage format (the so-called mini-LNG): container transportations and tanker transport.

But in the long term, LNG in this version will be a niche product. It is important in China and can be estimated at 10% of the market. Even in the absence of a gas deficit, "mini-LNG" can be used for gasification of areas not connected to the gas pipeline network, as well as for use in transport.

China has not yet received pipeline gas from Russia. Basically, it consumes the gas it produced on its own territory, imports the missing volumes through pipelines (primarily from Turkmenistan), and also in the form of LNG from various suppliers. China buys LNG including Russia. However, according to experts, last year it was at best about 95 million cubic meters is a miser. Of course, China is not aimed to receive gas exclusively from Russia and, how can, diversifies sources of imports. But, this does not reduce the importance for China of future Russian supplies.

At the same time, as analysts at Freedom Finance say, it is possible that Canadian suppliers slightly exaggerate the forthcoming growth of LNG consumption in China, in order to justify their own investments in production. Although the trend itself is noted correctly. But LNG projects cannot compete with pipeline gas, it's a different business.

Some experts emphasize that China consciously "flirts" with a multitude of suppliers. "The PRC consistently pursues a policy of diversification of gas supplies, successfully successfully colliding its suppliers with its foreheads. It is to maintain supply competition and this model is of value.
 
 
18.12.2017

Sec. Ross: We're going product by product, country by country from CNBC.

 
 

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